The Israel Innovation launched a report immediately inspecting the state of the Israeli know-how business a yr after the beginning of the Swords of Iron warfare. The business is important to Israel’s economic system: high-tech accounts for over half of the nation’s exports, a fifth of its GDP, and 1 / 4 of state revenues from revenue tax and corporations tax, in line with figures from the Ministry of Finance.
Among the many worrying factors raised by the report is the rising focus of funding in cybersecurity, and likewise in late-stage startups. It finds that 60% of investments throughout the interval of the warfare have been in massive financing rounds by established firms, with cybersecurity attracting 35% of complete funding, which is double the proportion in earlier years. As well as, in line with the report’s findings, substantial gaps have opened up between returns on funding in Israeli firms and on firms elsewhere on the earth. The Tel Aviv Expertise Index has risen by simply 14% for the reason that outbreak of warfare on October 7 final yr, which compares with a 31% rise within the Nasdaq index.
An extra concern is a standstill within the variety of individuals employed within the know-how sector, which has remained steady at about 400,000 since 2022. Furthermore, the employment combine has modified, with development in analysis and improvement jobs however a decline in product and enterprise jobs, which is liable to limit the business’s capability to develop in the long run.
Nonetheless, the report additionally factors to indicators of energy. Israel has maintained its standing as a spotlight of know-how funding, and is ranked third on the earth in that respect, after San Francisco and New York. In accordance with the report, since mid-2022, funding in Israeli know-how firms has stabilized at round $2 billion per quarter, which is analogous to the degrees seen in 2018-2019, earlier than the height of 2021. Furthermore, for the reason that outbreak of warfare, the change in funding in Israeli know-how firms in contrast with a yr beforehand has been just like the typical change in the principle know-how hubs around the globe.
As well as, the report finds that there was no substantial change within the variety of international enterprise capital funds lively Israel. Overseas funds account for about two-thirds of enterprise capital exercise in Israel.
Israel Innovation Authority CEO Dror Bin advised “Globes”: “Israeli excessive tech has been within the midst of a extreme storm for the reason that begin of the worldwide disaster in mid-2022, and for the reason that starting of 2023 when Israel skilled political instability, and from the fourth quarter of 2023 we’ve got been at warfare. Regardless of all this, the quantity of funding for the reason that warfare began has been just like the earlier yr, and we’re not seeing a decline in employment. That is all excellent news, indicating the robustness of the know-how sector. Nonetheless, there are issues of concern, comparable to the truth that development has primarily been in R&D on the expense of enterprise roles, which is liable to hurt long-term development. One other concern is the rising dependence on cybersecurity.”
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Suggestion to extend authorities funding
Among the many report’s suggestions is increased authorities funding in excessive tech, notably in early-stage startups and in fields the place the provision of capital is low. The Authority additionally requires steps to be taken to cut back uncertainty within the enterprise atmosphere, vis-à-vis international traders, with the purpose of preserving Israel’s standing as a world chief in technological innovation. “Two essential issues must occur within the price range and the Financial Preparations Legislation,” provides Bin. “One is a taxation package deal for international traders and multi-national firms, whereby we attempt to create an atmosphere for them not essentially of much less tax, however of higher certainty, to compensate for the uncertainty that at the moment exists in Israel, and the second factor, as occurred this yr, is a bigger price range.”
Revealed by Globes, Israel enterprise information – en.globes.co.il – on September 23, 2024.
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